65 listed iron ore development companies twist like devils to get to the front of a global pack.

JOHANNESBURG - Johannesburg-listed Exxaro, with interests in coal, mineral sands and base metals, this week told the Indaba mining conference in Cape Town that it was "pursuing several iron ore and ferrous opportunities, building on internal iron ore skills set, and AlloystreamTM technology".

This is a tall order, all right. Exxaro holds 20% in the Sishen Iron Ore Company, in South Africa's Northern Cape, and falling under the Kumba Iron Ore umbrella. Kumba is a relatively small player in the world's most profitable mining franchise, seaborne iron ore, where 75% of the trade is owned by the three kings of the business, Brazilian supergroup Vale, with its fabulous Carajás material, BHP Billiton, the world's biggest diversified resources group, and Rio Tinto.

Reflecting the status of the franchise, the stocks are ranked as the top three most valuable mining companies in the world, with BHP Billiton on top, followed by Vale.

The emphasis on seaborne is important. China is - by far - the world's biggest miner of iron ore, but remains net short, and has an insatiable thirst, especially for higher grade material than mined in the country. As in just about everything else, grade (quality) is crucial in the iron ore game.

Some idea of the value of the seaborne iron ore franchise was given in early June 2009, when Rio Tinto and BHP Billiton announced that BHP Billiton would pay Rio Tinto USD 5.8bn "for equity type interests at financial close" to take its interest in the two companies' Pilbara, Australia iron ore joint venture from 45% to 50%. This valued the full joint venture at USD 116bn. Seen as a stand alone entity, the BHP Billiton-Rio Tinto Pilbara iron ore joint venture would rank as one of the world's top five miners, by value.

Seaborne iron ore is a very expensive business to get into, as shown by Anglo American's experiences in 2007 and 2008, when it paid a total of USD 6.7bn to buy 100% of Minas Rio in Brazil, and also 49% of LLX Minas Rio (port of Açu). Railways and ports are essential in this game; Vale even operates its own giant shipping fleet.  Anglo American may have already spent billions acquiring Minas Rio, but has budgeted a further USD 3.6bn for capital expenditure to fully develop the phase 1 (only) system, due to reach full production only towards the end of 2013, at the rate of 27m tons a year, wet basis.

To give that some perspective, BHP Billiton recently approved USD 1.9bn capital expenditure for the RPG6 expansion project in the Pilbara. This will increase BHP Billiton's installed capacity in the Pilbara to 240m tons a year, dry basis, during calendar 2013.

Perfect timing for entry into seaborne iron ore would have been about seven years ago. In its 2002 annual report, Australia-listed Allied Mining & Processing said it was considering an "entry contribution for an investment in an operating gold business in Peru". Much time and effort had been put into evaluating the opportunity, and the board was confident that within 12 months it would be successful in securing a project on which it would be able to put its principal assets to use.

As a consequence of the strategy, the board had decided to divest its non-core businesses, including Allied Medical, and the Mt Nicholas iron ore project. In 2003, The Metal Group acquired Allied Mining & Processing. Going beyond substantial tenements at Mt Nicholas, the new owners promptly acquired Iron Ore Australia - along with its Mt Lewin tenements - and went big on iron ore. The acquiring group bought with it a new CEO, Andrew "Twiggy" Forrest, and a change in name to Fortescue Metals.

Today, with a market value of USD 12.3bn, Fortescue ranks as 35^th most valuable listed mining company in the world. As for the gold projects, two - the Jinya gold project in China and the Colibri Mining projects in Peru - had been taken to an advanced stage but "did not ultimately proceed". Forrest saw off most of the previous directors and oversaw the sale of Australia's Red Dam gold project and the Mobile Mineral Process Evaluation Unit to Allied Gold for AUD 2.5m. Today, Allied Gold has a market value of USD 264m, less than 2% of Fortescue's market value.

For the likes of Exxaro, wishing to get into the iron ore game, there are no less than 65 listed stocks, mostly on Australian soil, that can be broadly classified as iron ore developers, ranging from the likes of Aquila, a diversified stock, with a market value of USD 2.3bn, to far smaller stocks such as Adriana Resources, with iron ore interests in Brazil and Quebec.

There are also a good number of entities around that world, most of them large, that have integrated upstream, mining iron ore and then producing steel and allied products, such as Russia's Evraz (USD 12.2bn) and Severstal (USD 11.5bn), and Brazil's Usiminas (USD 6.6bn); established iron ore names are also possibilities, such as India's NMDC (USD 39bn).  Exxaro has natural limits, given it standing market value of USD 4.6bn.

The demonstrable rebirth of iron ore has stimulated all kinds of recovery projects and mining around the world; Magnetation, found on Minnesota's gigantic, but low grade, iron ore range, is just one example. Palladon Ventures has looked at reopening a Utah iron ore mine; other smaller miners have looked at opening or reopening iron ore mines in Alaska, Arizona, Missouri, Nevada, and New Mexico. This is a vast global sector, indeed, that includes major state owned players such as Luossavaara Kiirunavaara AB (LKAB, Sweden), and Société Nationale Industrielle et Minière (SNIM, Mauritania).

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